Fed officials play down talk of US cutback on bond purchases

TWO SENIOR Federal Reserve officials yesterday played down the chances that the US central bank would signal a readiness to reduce its bond buying at its meeting next month, dampening speculation the Fed's ultra-easy monetary policy might end soon.

New York Federal Reserve Bank president William Dudley and St. Louis Fed chief James Bullard, both of whom will vote at the 18-19 June meeting, made clear further economic progress was needed before they would support curtailing bond purchases.

Wall Street stocks rallied, with both the Dow Jones and Standard & Poor's 500 Index closing at new all-time highs after their remarks eased investor concerns that the Fed would reduce its stimulus.

“Inflation is pretty low in the US," Bullard said in Frankfurt. “I can’t envision a good case to be made for tapering unless the inflation situation turns around and we are more confident than we are today that inflation is going to move back toward target.”

Speaking in New York, Dudley said: “To the extent that the committee wants to reduce the risk of disrupting market functioning... it could decide to indicate that it will avoid selling mortgage-backed securities during the early stages of the normalisation process.”